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REFORMING THE COMMON AGRICULTURAL POLICY

Butter mountains have melted away, but what of the future of agriculture in Europe?

IT IS NOT the stuff of headlines, but it probably has the single biggest
impact on the European environment, our landscape, our policy towards
the non-industrialised world and the amount of money in our pockets. It
is the CAP - the Common Agricultural Policy.

Last summer, the CAP was forced into the headlines when Tony Blair launched
a campaign to reform the CAP, saying that it was an absurdity that had
to be reformed along with all EU financing - "which includes that
40% of the budget that goes on agriculture but which employs only 5% of
the people".

Blair doesn't seem to have made much progress so far on stimulating talks
that will lead to his stated goal of a new EU budget, including reform
of the CAP. But he has made no secret of his desire to position the CAP
as an outdated, irrelevant and unfair system of subsidies for a special
interest group (farmers). Is he right? And if so, what reforms should
be proposed?

What is the CAP?

In a nutshell, the CAP was introduced in 1958 into a Europe still emerging
from war. Its aims were to increase agricultural productivity, ensure
a fair standard of living for those employed in agriculture, stabilise
agricultural markets, ensure availability of food supplies, and ensure
that consumers pay fair prices for agricultural products.

To achieve these goals a system of price subsidies was introduced. Farmers
could produce as much as they liked and the European Economic Community
(EEC), through the CAP, would guarantee to purchase their produce at a
series of agreed, fixed prices. In addition, farmers were similarly guaranteed
fixed prices if they exported their goods abroad - these came in the form
of export subsidies.

By the early 1990s the CAP had become a monster in need of desperate
reform. Remember all those wine lakes and butter mountains? So much food
was being produced that the now enlarged European Union (EU) was producing
far more food than its citizens required. Normal market forces would have
corrected this with a massive fall in prices, but thanks to the CAP, prices
of agricultural goods in the EU stayed artificially high.

In 1991 the EU spent over 30 billion euros on the CAP, of which 18% was
being spent on storage facilities for surplus food and 33% on export subsidies.
In the sugar industry, 71% of funds were spent on export subsidies, annihilating
industries in the Caribbean, Brazil and other sugar-producing territories.

The effect was devastating. The CAP encouraged farmers to produce as
much food as possible without any regard for the environment, by increasing
yields through the use of toxic chemicals, fertilisers and pesticides,
whilst simultaneously devastating habitats by creating enormous mass-production
farms.

Another effect was that food dumping became endemic. African farmers
frequently found that they could not compete with the goods supplied from
the food mountains of Europe and quickly went out of business. Grain grown
two miles away became more expensive to sell than the European grain dumped
on them and transported half-way around the world! It is a shocking indictment
of how Western domestic politics have devastated the poorer parts of the
world - and how the rich have enriched themselves at the expense of the
poor.

And it would not be impossible, I am sure, to build a link between the
CAP and terrorism. I should think the farmers of Somalia or Ghana feel
suitably embittered by the way their livelihoods have been devastated.
The suicide rates of those involved in the farming industry are far higher
than in any other sector. A report by Christian Aid last year laid the
blame squarely at Britain's door for the appalling suicide rate amongst
India's farmers. In Andhra Pradesh more than 4,000 farmers committed suicide
between 2000 and 2004 because of debt problems resulting from so called
free-trade agreements with the International Monetary Fund (IMF) and the
World Bank.

Reforming the CAP

Feeling guilty? Well, despite Europe's long history of colonial exploitation
and environmental destruction, changes began to happen in the early 1990s
with a range of initiatives to reduce food surpluses and their storage
costs. More recent reforms have been designed to bring internal EU prices
into line with international prices so that European agricultural production
is geared towards providing agricultural products that compete fairly
in competitive world markets.

The concept was to move towards a system of subsidies that were based
not on price guarantees but on subsidising farmers with direct payments
based on the size of their farms, thus 'de-coupling' subsidies from fixed
prices for products. This would allow prices to fall in line with demand,
but without undermining farmers' livelihoods. Payments would also be linked
to a respect for standards in the areas of the environment, food safety,
plant health and animal welfare, as well as a requirement to keep all
farms in good agricultural and environmental condition. Export subsidies
were also to be phased out.

There would also be a cap on the total subsidies paid to farmers (300,000
euros) so that existing distortions in which larger farmers can make massive
profits from CAP subsidies would disappear. (For example, in 2004 sugar
refiner Tate & Lyle received a payment of 190 million euros through
the CAP.) The money saved would be diverted into a new pillar of rural
development funding, whereby farmers could claim subsidies on a range
of environmental projects, wetland restoration, habitat reconstruction,
coppicing, organic farm production, and so on.

But it has taken the EU eleven years to implement such reforms. Some
came into effect early in the 1990s (to reduce stockpiles, for example);
others, such as direct subsidies and funding for rural development, as
recently as 2003. Even now countries do not have to implement them fully
until 2008 and many have negotiated various types of opt-out to suit their
own narrow interests.

Will reforms make a difference?

Already there are disturbing signs. Having required developing nations
to agree to 'free-trade' rules in return for IMF and World Bank aid, the
new CAP reforms are leading to significant price reductions across a range
of agricultural goods in the EU. The irony is that the successful Third
of the World producers (many of those driven from their home markets by
previous EU food dumping but who have managed to penetrate EU markets
that offer higher prices for agricultural products) now face the horrific
prospect of finding that lower prices mean there is not enough margin
for them to be able to make a profit.

In addition, the fact that EU farm product prices are to come into line
with world prices means that EU farmers (who still receive direct subsidies)
are able to compete more effectively with indigenous producers in the
rest of the world, despite having less efficient labour and manufacturing
practices. To protect against this, so-called free-trade agreements are
going to prove highly elusive as countries seek to protect their own farming
and food manufacturing industries - hence, at least in part, why the current
round of World Trade Organization (WTO) talks have, in effect, broken
down.

On the positive side, 4.8 billion euros was spent through the CAP on
rural development in 2004. Although that only represents roughly 10% of
the overall CAP budget, environmentalists see this as a step in the right
direction. Overall, however, it is highly speculative to suppose that
the current CAP reforms will address key issues such as environmental
welfare, fair trade, sustainability and value for money.

It would seem that the point about the CAP needing to be further radically
reformed is well made. Using this argument to veto an EU budget as well
as avoid the domestically thorny issue of having to address the UK's budget
rebate could also be seen as shrewd politics. There is then the question
of EU enlargement - everyone agrees it would be impossible to continue
to support the CAP without some kind of reform, given the financial support
that farmers in, say, Poland, would require in order to be on equal terms
with those in France.

What should reform look like?

Given the critical nature of the CAP issue, it is a scandal that so little
effort is being made by Blair, Gordon Brown or other major politicians
and parties to stimulate a debate and put forward constructive proposals.

Let's start with our own premise. The CAP should be the vehicle through
which the EU nations collectively tackle issues of environmental welfare,
re-invigoration of local and rural communities and the provision of healthy
food. Further assumptions should be that any CAP design should reinforce
rather than contradict a commitment to cutting greenhouse gases and should
not harm the prospects of other countries becoming self-sufficient.

For a start this means we should be thinking about being much more ambitious
with the CAP. Blair talks about cutting it back, re-investing in research
and technology for other industries, but without articulating any substantive
purpose or goal. This is missing a huge opportunity.

The CAP should be considered as a way forward for a total revisioning
of our food production and distribution. Incentives should be provided
to everyone who grows their own fruit and vegetables, and they should
all be classified as farmers. The precise level of incentive, and its
affordability, would have to be worked out, but the principles are:

o If you grow your own food you benefit financially;

o to qualify for the subsidy you must adhere to standards set by the Soil
Association on organic production methods; and

o any products sold through retail outlets that are NOT produced within,
say, fifty miles of where the goods are sold will be subject to a CAP
surcharge - which will become a major source of CAP finance. This means
consumers who insist on purchasing their foods from non-local producers
pay a premium.

Nowadays, we are used to buying anything, in any season, thanks to the
emergence of the supermarket and global trade. It should be a primary
aim of the CAP to redress this and to incentivise people to eat what is
grown locally and what is available as an indigenous crop in season.

To protect against unfairly benefiting only those with access to land,
the EU should vigorously pursue local allotment schemes to allow individuals
from any income bracket to participate and benefit from organic food production
if they wish to.

There are huge social and environmental benefits in distributing the
task of food production to the masses (rather than have mass-production
by the few). Here are just a few that spring to mind:

People eat more healthily.

People think about what they eat and learn where it comes from.

People are more sensitive to nature and their environment.

People exercise more.

People gain a sense of fulfilment - if this seems quirky, then just
try eating and cooking what you have grown, and you will see what I
mean.

Local markets will thrive.

The mass transportation of food products will be disadvantaged in
the marketplace, and these will have to pay a CAP surcharge, helping
to cut carbon emissions and reduce global warming.

But there is no way this vision of the CAP can on its own tackle the
thorny issue of fair trade. If the CAP encourages EU citizens to become
consumer-producers who are rewarded for local organic food production,
then its very success should lead to a dramatic decrease in world trade
in agricultural products. Therefore, CAP reform must go hand in hand with
reform of the WTO, and a new agenda must be tabled for WTO members to
discuss. It will not be an easy discussion, going against the grain of
current faith in globalisation and free trade, but the premise must be
that food should be produced and consumed as close together as possible.
This will support local economies and employment, stimulate self-sufficiency,
avoid unnecessary transportation and lead to a more sustainable future.

It means that nations who insist on importing luxury foods for domestic
consumption must be made to pay a surcharge; this in itself will create
a development aid fund that dwarfs today's IMF and will begin to address
the issue of world inequality in an even-handed and market-driven way.

Will it ever happen?

In a word, yes! I think as surely as night follows day. Phrases such as
'free trade' and 'economic growth' make us think we have no choice and
that globalisation is inevitable. It is not. Its demise will be a consequence
of the undeniable fact that the Earth's natural capital cannot be limitlessly
used.

Will it happen soon? There is currently no sign of the necessary political
leadership or even that the level of debate has broadened sufficiently
that the beginnings of a plan like the one suggested above can emerge.
But the CAP is such an important chance because change-makers' best opportunities
are to use pre-existing structures to drive forward changes.

The CAP needs reform but no-one agrees why or what it should be for.
Therefore, the CAP is a golden opportunity. Indeed, there must be a million
more ideas, and I don't for a second claim to have all the answers, but
there is no excuse for so-called leaders not to engage their citizens
in a constructive debate about the CAP with a range of challenging, radical
and creatively thought-through options.